FDA Reform Can Lift U.S. Economy

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March 11, 2013

By Tomas J. Philipson and Andrew von Eschenbach.

Without a growing economy that creates more high-paying jobs, both President Barack Obama and congressional Republicans face the unpalatable prospect of much higher taxes or reductions to popular programs (or both). Growth is the best way to cut this Gordian knot.

One place to start is by lowering unnecessary barriers facing innovative U.S. companies that are trying to bring new products to market, particularly in the biopharmaceutical sector. Less sensitive to the business cycle, with jobs that pay about double the average private-sector salary, biopharma is a leading U.S. exporter.

Both Democrats and Republicans know that excessive regulation is slowing innovation in the industry. Shortly before the 2012 election, the President’s Council of Advisors on Science and Technology released a report, which received bipartisan praise, asserting “broad agreement that our current clinical trials system is inefficient.”

One inefficiency the report identifies is outdated regulation. The inability of the Food and Drug Administration to keep pace with changes in medical science threatens both economic prosperity and public health. The drug-approval process is glacial: it takes about 12 years and $1.2 billion to develop a single new drug that is approved by the FDA.

The council’s report establishes an ambitious, yet reachable, national goal: doubling the current annual output of new medicines for patients. We believe existing evidence suggests this goal can be met by altering the FDA’s onerous clinical-trial requirements.

Clinical Trials

The FDA regulates the quality and safety of medical products, only granting marketing approval after increasingly laborious, expensive, three-phase clinical trials. Phase 1 trials involve a few dozen patients and focus on safety; Phase 2 trials are larger and look for evidence on optimal dosage and effectiveness; Phase 3 trials are focused exclusively on effectiveness.

Clinical trials account for a large share of industry research and development costs, with Phase 3 trials accounting for about 25 percent and requiring (on average) three years for completion. Manufacturers that are obliged to satisfy shareholders and stay financially viable may choose not to take promising products into the prolonged Phase 3 process, often called “the valley of death.”

For medicines that make it to market, the long process delays sales and shortens effective patent life, severely damping the industry’s incentive to invest in new treatments.

These Phase 3 clinical trials served us well in the past. Today, in an era of precision or personalized-drug development, when medicines increasingly work for very specific patient groups, the system may be causing more harm than good for several reasons.

First, because of their restrictive design and the way the FDA interprets their results, Phase 3 trials often fail to recognize the unique benefits that medicines can offer to smaller groups of patients than those required in trials.

Second, information technologies have created improvements in our ability to monitor and improve product performance and safety after medicines are approved for sale. Post-market surveillance can and should reduce dependence on pre-market drug screening in Phase 3 trials.

Third, reducing reliance on Phase 3 trials is unlikely to introduce an offsetting harm induced by more dangerous drugs, since evidence supporting safety is produced in earlier phases. Manufacturers also have powerful incentives to maintain drug safety, since they take enormous financial hits — well beyond the loss of sales — when drugs are withdrawn after approval.

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